Eight months after 2023 kicked off with widespread recession calls across Wall Street, the Atlanta Fed is projecting the economy will grow nearly 6% in the third quarter.
On Tuesday, the Atlanta Fed's GDPNow estimate moved up to 5.8% from 5.0% a day prior after fresh data from the Census Bureau's showed housing starts increased 3.9%. in June. If the 5.8% GDP growth number held, it'd mark the most robust period of economic growth since the fourth quarter of 2021.
The higher projection from the Atlanta Fed is the latest piece of data pointing to a stronger than expected US economy. On Tuesday, July's retail sales report revealed sales increased 0.7% in the month with the control group, which contributes directly to Gross Domestic Product (GDP), rising 1.0%. Economists surveyed by Bloomberg had expected just a 0.5% increase for the control group.
The upbeat print on the consumer came after recent jobs data showed the economy is still adding jobs while unemployment remains historically low and monthly wage growth has begun to outpace inflation, providing a potential boost for further consumer spending.
2023 has been marked by upward revisions to economic growth. An initial reading for first quarter GDP of 1.1% was boosted to 2.0%. The first reading of second quarter GDP came in hotter than expected, too. A 2.4% reading in late July, revealed the economy grew at a faster pace in the second quarter.
The growth has become so robust to the upside that some economists are now beginning to question if the positive data could be detrimental to recent improvements on the inflation front.
"While good news for the near-term real GDP growth outlook (Q3 is likely to print at least 2% annualize and probably stronger), the resilience of the US consumer complicates the picture for the Fed," Citi US economics research analyst Gisela Hoxha wrote in a note on Tuesday after the release of the retail sales report. "Upside surprises to demand for goods mean increasing upside risk to prices for a category of inflation that has been reliably soft this year."